Incorporating (inc) a business provides several advantages, such as limited liability protection for owners, enhanced credibility, and potential tax benefits. It also allows the business to raise capital through the sale of stock and ensures continuity beyond the involvement of the original owners. Overall, incorporation offers a structured and secure framework for business growth and development. Let’s explore more about the concept.
What is Form INC-20A?
Form INC-20A is a declaration required to be filed by directors of a newly incorporated private limited company confirming that every subscriber to the memorandum has paid the value of the shares agreed to be taken by them. This form serves as a declaration of commencement of business and must be filed with the Registrar of Companies (RoC) before a company can start its business operations. The filing of this form is mandated under the Companies Act, 2013, and is a critical step for new companies to comply with statutory requirements.
A business loan can play a crucial role in this process by providing the necessary funds to ensure that each subscriber to the memorandum can pay for their shares promptly. This financial support helps the company meet its initial financial commitments, thereby facilitating the smooth and timely filing of Form INC-20A. Additionally, a business loan can assist in covering other startup costs, such as operational expenses, equipment purchases, and marketing efforts, ensuring that the company is well-prepared to commence its business activities. By securing a business loan, new companies can achieve financial stability and compliance, setting a strong foundation for successful operations.
Legal provisions to file Form INC-20A
The legal requirement to file Form INC-20A is underpinned by Section 10A of the Companies Act, 2013. This provision states that a company having a share capital must not commence any business or exercise any borrowing powers unless this declaration is filed with the RoC within 180 days of incorporation. Here are key points:
- Mandatory for all new companies with share capital.
- Must affirm that all shares subscribed in the memorandum are paid.
- Filing must occur within 180 days of company formation.
How to file a declaration for business
Filing a declaration for business commencement involves several steps that ensure compliance with legal requirements. Here is how to proceed:
- Prepare a declaration confirming that each subscriber has paid for the shares taken.
- Attach proof of payment for share capital.
- File the declaration using Form INC-20A through the Ministry of Corporate Affairs (MCA) portal.
- Engage with professionals in operations management if needed, to streamline the process.
Documents for filing declaration for business
When filing a declaration for a business, it's essential to prepare and submit several key documents. Below is a table outlining the necessary documents, ensuring compliance with the legal requirements.
| Serial No. | Document Name | Description |
| 1 | Certificate of Incorporation | Official document granting the company its legal status. |
| 2 | Proof of Registered Office | Document showing the company's registered address, like a lease. |
| 3 | Utility Bills | Recent utility bills (less than 2 months old) as address proof. |
| 4 | Details of Members | Information on directors and shareholders. |
| 5 | Declaration by First Directors | Form INC-20A declaration and evidence of paid-up capital deposit. |
This table provides a structured checklist for businesses to ensure all necessary documents are prepared and submitted correctly.
INC-20A due dates and late filing
The due date for filing Form INC-20A is within 180 days of the company's incorporation. Failure to meet this deadline can result in penalties or additional fees. Here are key points to remember:
- File within 180 days from incorporation.
- Late filing attracts a penalty of up to INR 50,000.
- Continuous failure may lead to company removal from the RoC’s register.
Approval of Form INC-20A by the RoC
Once Form INC-20A is submitted, the RoC reviews the declaration and attached documents for accuracy and completeness. Here is what happens:
- RoC examines the documentation. This initial review assesses whether all required details have been accurately provided and if the documents meet the statutory requirements. If the documentation is found to be inadequate, the RoC will demand further evidence or clarifications.
- Discrepancies may lead to queries or a need for resubmission. If discrepancies or errors are identified in the submission, the RoC will issue queries or notify the need for resubmission of the form. This step ensures that all information complies with legal standards before approval.
- Approval is typically communicated via email or through the MCA portal. Once the review is complete and no further issues are found, approval is granted. The confirmation of this approval is sent to the registered email associated with the company or can be accessed through the MCA (Ministry of Corporate Affairs) portal.
What are the consequences of non-filing of INC-20A?
Not filing Form INC-20A can have significant legal and operational repercussions for a company. Important consequences include:
- Bar on commencing business operations. If a company fails to file Form INC-20A, it is legally prohibited from commencing any business operations or exercising any borrowing powers. This restriction remains until the form is duly filed and approved by the RoC.
- Imposition of financial penalties. Companies that do not comply with the filing requirements of Form INC-20A are subject to financial penalties, which can be substantial and increase over time depending on the duration of the non-compliance.
- Potential striking-off of the company from RoC records. Persistent non-compliance can lead to more severe consequences, such as the striking-off of the company's name from the Register of Companies. This action effectively dissolves the company unless restored by a court order.
Conclusion
Compliance with the filing of Form INC-20A is crucial for new companies to legally commence operations. This process not only aligns with statutory requirements but also prepares the company for future financial activities, such as obtaining a business loan. Adhering to these regulations ensures smooth business operations and establishes a foundation for corporate credibility and trustworthiness. Additionally, timely compliance can facilitate easier access to investment and credit opportunities, as it demonstrates a company’s commitment to lawful business practices. Moreover, it aids in building a positive reputation with various stakeholders, including suppliers, customers, and financial institutions.
